Homework Assignment #3

| February 14, 2018

Homework
Assignment #3 Name:
___________________________________

Part 1: At December 31, 2012, Silver Traders Company had the following trial
balance.

Silver Traders Company
Unadjusted
Trial Balance
12/31/12

Dr

Cr

Cash

360,000

Accounts Receivable

60,000

Allowance for Doubtful Accounts

3,000

Short Term Note Receivable

24,000

Supplies

6,000

Inventory

65,000

Equipment

195,000

Building

Accumulated Depreciation

75,000

Copyright

44,000

Accounts Payable

45,000

Dividends Payable

Interest Payable

Unearned Revenue

33,000

ST Note Payable

15,000

LT Mortgage Payable

Bonds Payable

200,000

Premium on Bonds Payable

13,000

Common Stock – $1par

2,000

Additional Paid in Capital – CS

87,000

Preferred Stock – $5 par

1,000

Additional Paid in Capital – PS

50,000

Treasury Stock

Retained Earnings

105,000

Dividends

6,000

Sales

924,000

Sales Returns & Allowances

4,000

Sales Discounts

9,000

Cost of Goods Sold

385,000

Bad Debts Expense

Depreciation Expense

50,000

Wages Expense

260,000

Rent Expense

65,000

Insurance Expense

16,000

Supplies Expense

7,000

Interest Revenue

1,000

Interest Expense

9,000

Gain on Sale of Equipment

15,000

Income Tax Expense

4,000

Total

1,569,000

1,569,000

Instructions: You must turn in
the work performed on the sheets printed with this page. This WILL NOT BE ACCEPTED ON PLAIN PAPER.

Write the journal entries (on the following General Journal
page) required for each of the events described below.
Use ONLY the
accounts listed on the trial balance for your journal entries.
These transactions may not be in chronological order,
it is ok to do the journal entries in the order given.
Post the transactions to individual T-accounts and
prepare an adjusted trial balance for The Kash Leasing Company as of
December 31, 2012.

1.
The company last paid interest on the ST note payable on November
1, 2012. Record the accrued interest expense for the
last 2 months of 2012. The annual
interest rate is 6.5%. Round to nearest whole dollar.

2.
On Jan 1, 2012, the company issued 10%, 10-year bonds when
the market rate for similar investments is 8%.
The company pays interest each year on January 1st. Using the effective interest method of
amortizing the premium on bonds payable, accrue the interest expense as of
December 31, 2012. Round to nearest whole dollar for your interest expense calculation.

3.
The company previously collected cash for sales that were to
be completed in the future. The company
completed some of these sales during December and now owes only $18,000 of that
unearned sales revenue. Record the necessary adjustment for December 31st,
2012.

4.
The company purchased a building November 30th
with a LT Mortgage Payable of $150,000 at 8% interest. Record the purchase of
the building.

5.
The above mortgage payable’s terms require the company to
make installment payments over the term of the loan. Each payment consists of interest on the
unpaid balance of the loan and a reduction of loan principal. Record the first monthly
payment of $1,850 on the LT Mortgage Payable on December 31st.

6.
On December 30th, 2012, the company purchased 50
shares of its own Preferred Stock for Treasury Stock for $13 per share.

7.
The company issued 500 shares of Common Stock for $6,000 on
December 25th.

8.
On December 29th the company declared a cash
dividend of $2.00 per share for common stock on the shares issued and declared (including the additional 500 shares
declared on December 25th.)

GENERAL JOURNAL

DATE

ACCOUNT
NAME

DEBIT

CREDIT

Use the space below for T-accounts (REQUIRED FOR GRADING). For each account in the journal
entries, you will need to adjust the balance from the preliminary trial balance
with the debit or credit from the journal entry. You only need to do T-accounts
for those accounts that change from the JEs.
Silver Traders Company
ADJUSTED TRIAL BALANCE
12/31/12

Dr

Cr

Cash

Accounts Receivable

Allowance for Doubtful Accounts

Short Term Note Receivable

Supplies

Inventory

Equipment

Building

Accumulated Depreciation

Copyright

Accounts Payable

Dividends Payable

Interest Payable

Unearned Revenue

ST Note Payable

LT Mortgage Payable

Bonds Payable

Premium on Bonds Payable

Common Stock – $1par

Additional Paid in Capital – CS

Preferred Stock – $5 par

Additional Paid in Capital – PS

Treasury Stock

Retained Earnings

Dividends

Sales

Sales Returns & Allowances

Sales Discounts

Cost of Goods Sold

Bad Debts Expense

Depreciation Expense

Wages Expense

Rent Expense

Insurance Expense

Supplies Expense

Interest Revenue

Interest Expense

Gain on Sale of Equipment

Income Tax Expense

Total

If this company had a CS 3-1 stock split on Dec 31st
2012:

How many shares would there be after the split?

What is the par value per share in dollars?

How many shares are outstanding at 12/31/2012?

What is the effect on the accounting equation when the
Treasury Stock is purchased?

Does the Carrying Value of the Bonds Payable and
Premium increase or decrease over the life of the bonds?

What will be the balance in the Mortgage Payable
Account at Jan 31st after the second monthly payment is made.

The Company is about to issue $2,000,000 of 5-year, 10%
bonds. Interest will be paid
semi-annually. The market interest rate for such securities is 8%. How
much can The Company expect to receive from the sale (issuance) of
these bonds?

Part 2: NOTE: This
is a DIFFERENT COMPANY. Using the
trial balance below, complete the Multi-Step
Income Statement and prepare the Statement
of Retained Earnings and Classified
Balance Sheet on the pages which follow. To get full credit you must include all critical subtotals.

Klara Kay Company
Adjusted Trial
Balance
December 31, 2012

DEBIT

CREDIT

Cash

1,600

Accounts
Receivable

2,560

Allowance
for Uncollectible Accounts

670

Short
term Note Receivable

200

Interest
Receivable

20

Supplies

30

Inventory

3,000

Prepaid
Expenses

150

Equipment

10,720

Accumulated
Depreciation

1,970

Copyrights

600

Accounts
Payable

370

Interest
Payable

20

Unearned
Revenue

40

Long
Term Note Payable

1,400

Common
Stock

7,600

Add’l
Paid-in-Capital

800

Retained
Earnings (1/1/12)

3,160

Dividends

600

Sales

36,900

Sales
Returns & Allowances

40

Sales
Discounts

60

Cost
of Goods Sold

22,200

Bad
debt expense

30

Depreciation
Expense

770

Amortization
Expense

70

Wages
Expense

8,000

Rent
Expense

500

Office
Expense

80

Supplies
Expense

100

Selling
Expense

800

Interest
Expense

200

Interest
Revenue

150

Income
Tax Expense

750

Totals

53,080

53,080

Klara Kay Company
Multi Step Income Statement
For the year ended December 31, 2012

Klara Kay Company
Statement of Retained Earnings
For the
year ended December 31, 2012

Klara Kay Company
Classified Balance Sheet
December 31, 2012

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